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Werner (WERN) Down 15.6% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Werner Enterprises (WERN). Shares have lost about 15.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Werner due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Werner Enterprises Q1 Earnings Beat Estimates, Surge Y/Y

Werner Enterprises delivered first-quarter 2019 adjusted earnings per share of 52 cents, beating the Zacks Consensus Estimate of 49 cents. Moreover, the bottom line surged 37% year over year on the back of new truck and trailer fleet.

However, total revenues of $596.1 million fell short of the Zacks Consensus Estimate of $623 million but increased 6% from the year-ago figure. The top line benefited from dedicated fleet expansion, lane mix changes and higher contractual rates.

Operating income (adjusted) came in at $49.17 million in the reported quarter, up 40%. Also, operating margin expanded 200 basis points to 8.2% on the back of an improved fleet among other factors. Meanwhile, operating expenses summed $548.1 million in the quarter under consideration, rising 3.9%.

Segmental Results

Truckload Transportation Services (TTS) segment’s revenues totaled $462.89 million, up 7.3% year over year. This upside was owing to the rise in average trucks in service and an increase in average revenues per truck. Adjusted operating income jumped 32% to $44.1 million in the quarter on higher revenues and an effective cost management. Additionally, adjusted operating margin was up180 basis points (bps) to 9.5%. Moreover, adjusted operating ratio improved 180 bps to 90.5%.

Werner Logistics segment’s revenues grossed $117.37 million, flat year over year. Segmental results were hampered by severe winter weather conditions and lower spot pricing trends among other factors. Operating income soared 71% to $4.71 million in the quarter under discussion. Additionally, operating margin improved 170 bps to 4% on effective cost management. The “other” segment accounted for the remainder of the top line.

Liquidity

As of Mar 31, 2019, the company had cash and cash equivalents of $64.74 million compared with $33.93 million at 2018 end. Long-term debt (net of current portion) totaled $50 million at the end of the first quarter, flat compared to that in 2018 end.

2019 Outlook Intact

The company continues to anticipate 3-5% truck growth in the current year with the same expected, primarily in its Dedicated fleet. Moreover, this growth is expected in the first three quarters of the year. Additionally, one-way truckload revenue per total mile is still estimated to increase in the 4-8% range. Meanwhile, the company expects gains on the sales of equipment between $18 million and $20 million. Effective tax rate is predicted in the 25-26% band while net capital expenditures are anticipated between $275 million and $300 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Werner has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Werner has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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